Suppose your expectations regarding the stock price are as follows: State...
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Finance
Suppose your expectations regarding the stock price are as follows:
State of the Market
Probability
Ending Price
HPR (including dividends)
Boom
0.25
$
140
54.5
%
Normal growth
0.30
110
16.5
Recession
0.45
80
13.0
Use the equations E(r)=sp(s)r(s)E(r)=sp(s)r(s) and 2=sp(s)[r(s)E(r)]22=sp(s)[r(s)E(r)]2 to compute the mean and standard deviation of the HPR on stocks. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
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